Like any other small business, a beauty salon needs to keep an eye on its finances. If you don’t have a lot of business or accounting experience, you might struggle with this sort of financial management. Fortunately, we have some bookkeeping advice to help you keep your accounts in order.
We’ll provide a range of beauty salon bookkeeping tips that can make accounting for your business much more straightforward, including:
- Keep your personal and business finances separate
- Record expenses carefully
- Track your cash flow
- Budget often
- Use accounting software
Keep your personal and business finances separate
Some small business owners use their personal bank account for business transactions. While this might seem like a simpler option, it’s not worth it: if you don’t keep your business and personal money separate, your financial records will become very disorganised very quickly.
If your records are disorganised, you’ll not fully understand the amount of money your business is making or spending. This lack of understanding could lead to overspending, which in turn can lead to serious cash shortages and even bankruptcy. This makes separating your personal and business finances one of the most important bookkeeping practices a small business could adopt.
The best way to do this is to set up a business account, such as Countingup. There aren’t any significant drawbacks to setting up a business account: it’s usually a very quick and easy process, and most business accounts come with helpful additional features. For instance, Countingup is a two-in-one product, combining a business account with a ton of useful accounting software.
Once you set up a business account, your transaction history and financial information will be much easier to see and analyse. This can help you make better financial decisions, which is enormously helpful if you’re a startup owner with little experience in enterprise.
Record expenses carefully
A beauty salon will likely have a considerable number of business expenses. For example, you might have a range of hair and makeup products you use as part of your services or even sell to your customers. On top of that, you might need to pay rent on a space that you use for providing different services to your clients.
An essential part of bookkeeping for a beauty salon is recording these expenses. Since you’ll likely be making purchases (i.e. restocking different beauty products) frequently, there will be a lot of costs to keep track of. Try to put a system in place for organising your expenses to ensure they’re easy to access in the future.
The primary reason to track your expenses is to claim them back as business expenses when filing taxes. For instance: if you earn £40,000 and claim £10,000 worth of expenses, you will only have to pay tax on £30,000 of your earnings.
Claiming business expenses can reduce your tax bill greatly, so remember to look into the range of business expenses you can claim while doing taxes.
Track your cash flow
One of the most important things to remember when accounting for any hair or beauty business is that you need to monitor your cash flow. This is because cash is necessary for your business to continue running. It allows you to purchase beauty products, rent any equipment and ensure you can continue to serve your customers.
Cash flow refers to all the money coming into and going out of your company. For example, all the supplies you purchase and fees your customers pay make up part of your cash flow. It’s best to maintain a positive cash flow, which means that your income is higher than your outgoing expenses.
Keeping an eye on your cash flow is essential because it has an enormous impact on your business decisions. For instance, your cash flow may dip if you invest in new equipment. If you don’t monitor your cash flow and purchase an expensive new salon chair, you may find you don’t have enough money to cover the operating costs of your business.
Planning ahead makes most jobs easier. Small businesses should often make budgets to plan their spending since it prevents overspending. For example, you might create a budget every month or every week.
However often you do so, the important thing is to create budgets regularly. By doing this, you’ll ensure you have a very up-to-date idea of how your beauty salon is doing and how much money you have to spend.
Some business accounts can further help with budgeting if it has additional features that help with keeping track of your incoming and outgoing cash. For instance, Countingup offers real-time profit and loss reporting.
A profit and loss statement is a financial document that shows how much money your company has made and lost over a set period. The Countingup app displays a real-time view of your profits and losses, updating as you make transactions on the business account.
It also shows your net profit by automatically deducting the losses from the profits. So by using Countingup, you’ll have a really up-to-date figure on your company’s available cash.
Use accounting software
One of our best tips for beauty salon bookkeeping is to start using accounting software. This software can automatically do a lot of the more complex or repetitive bookkeeping tasks, saving you from spending a lot of time manually doing them.
Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are.
You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!
Click here to find out more and start your three-month free trial today.